Showing posts with label Jerome Powell. Show all posts
Showing posts with label Jerome Powell. Show all posts

Tuesday, June 9, 2020

NASDAQ Makes New All-Time High As Protests, Coronavirus Continue, FOMC Meets

It's official.

We live in Bizarro-world.

Protests stemming from the police killing of George Floyd continue to proliferate across the United States and around the world at the same time the COVID-19 coronavirus spreads against government efforts to control it. At the same time, stocks continue to erase the losses from the initial virus shock that occurred in March when stocks dove into bear market territory.

As for the shortest bear market in world history - five weeks - it's exceptionally amusing to see the money magicians at the Federal Reserve and other central banks around the world create trillions of dollars (and yen, and euros, and pounds, and yuan) out of thin air and see that money flow almost directly into stocks, as if there were no other asset class in the world. Obviously, there are other assets classes, but the stock market is the one which delivers the most bang for the buck, so much so that the NASDAQ made a new all-time high on Monday.

That's just not normal. Nothing about the Fed-induced stock rampage is normal. To make a point, one could attest to it being mostly fake. It's fake money, counterfeited by the Federal Reserve, funneled to primary dealers to ram into stocks whose earnings have been cratering for months, some for years.

Measured in earnings growth or other metrics, stocks have never been more expensive, making a case for the "greater fool" theory where one buys shares in an overvalued company at an inflated price based on the idea that somebody dumber than you will buy it at an even higher price. It's working. There are fools a'plenty making a mockery of fundamentals and due diligence cashing in at incredible rates of return.

Take for instance the NASDAQ, which closed at 6,904.59 on March 16, the bottom of the COVID-19 shock treatment. Monday's record close of 9,924.75 marks an incredible return of 43.74 percent in less than three months. Annualized, that's a return of more than 174 percent, a figure that would have everybody in the world retiring at 40 in the ultimate "buy the dip" scenario.

Obviously, that kind of return is unthinkable, or, at least it used to be, until we entered Bizarro-world where cats mate with mice, birds sing full operas and Tom Hanks becomes a top home run hitter in the major leagues... if there was such a thing as professional baseball, which there is not, nor is there likely to be this year.

In bizarro world, Hertz, which filed for bankruptcy a few weeks ago and traded for under a dollar last week, soar to over $5.50 on Monday. There's a 500% return right there, in just a few days. Thank you Jerome Powell, unrivaled leader of Bizarro-world.

Speaking of Mr. Powell, the FOMC begins a two-day meeting this week at the end of which they will announce their monetary policy. The ritualism of the Fed harkens back to tribal proceedings of the Aztecs, wherein the almighty witch doctor or shaman would enter the temple of the gods - with or without virgins - and emerge a day or two later with a proclamation for the masses. The wizened leader would announce that the rainy season was ending, or that pomegranates could cure mental illness.

The savages would praise the leader and spend the evening partying and dancing until they wore themselves out. It's an apt analogy for the ritual FOMC meetings which are held 10 times a year, or, for the anachronistically-unchallenged, SSDD.

Tuesday's meeting will extend to 2:00 pm ET on Wednesday, at which time the money masters will make their announcement that all is well, release a summary of economic projections, and hold a press conference at which Chairman Powell will amuse and bedazzle the attendant financial media slaves.

And Bizarro-world will continue.

At the Close, Monday, June 8, 2020:
Dow: 27,572.44, +461.46 (+1.70%)
NASDAQ: 9,924.75, +110.66 (+1.13%)
S&P 500: 3,232.39, +38.46 (+1.20%)
NYSE: 12,836.60, +195.16 (+1.54%)

Wednesday, December 11, 2019

Waiting On The Fed Futility Amid Repo Crisis

Back in mid-September, as many will no doubt recall, the Fed had to step into the REPO market and provide liquidity via collateral auctions, mainly in the form of treasury bills and notes, and mortgage-backed securities (yes, the deadly MBS), which are still out there, floating around, handled like hot potatoes.

Since that time, the Fed has kept up appearances by continuing to provide POMO and TOMO (Permanent (P) and Temporary (T) Open Market Operations) to the tune of anywhere from $30 billion to $60 billion per day. That's right, PER DAY, and it's often been more. That's how big the overnight lending business is. Huge. The REPO market is also what triggered the Great Financial Crisis of 2008, when first, Bear Stearns, then, Lehman Brothers, were forced into bankruptcy by being unable to borrow from the overnight REPO market.

The problem with both Bear and Lehman was that their collateral consisted of highly toxic, dodgy MBS, or as is commonly referenced, sub-prime packaged loans. Lenders on the other side of the ledger were hesitant to lend to either, fearing that not only was the collateral of a suspect nature, the firms - Bear and Lehman - were buying more of them as an integral part of their business structure.

In 2008, this all blew up, the Fed stepped in, flooded the world with liquidity (buying up all the toxic MBS it could) and the collapse of the global financial system was averted.

Note that the collapse was averted, not solved, not cured, not by a long shot. The Fed's been busy keeping markets in some degree of stability ever since.

On Wednesday (today), the Fed's FOMC will likely announce no change n the federal funds rate, but that, besides being a foregone conclusion, isn't the real story. For that, in the interest of time and space, Money Daily bids adieu to this commentary, and offers a couple of links that may or may not render the REPO markets as something understandable to the reader.

First, this excellent video with Paddy Hirsh explaining just how the REPO market operates (about 8 minutes of time well spent):


Then, just to make matters a little more interesting, this ZeroHedge story featuring Zoltan Pozsar claiming that the REPO market is about to explode again, and that a stock market crash is imminent.

Take that ZeroHedge article with as many grains of salt or sugar your risk appetite will absorb, but bear in mind that Mr. Pozsar was, as ZeroHedge purports,...
instrumental during his tenure at both the US Treasury and the New York Fed in laying the foundations of the modern repo market, orchestrating the response to the global financial crisis and the ensuing policy debate (as virtually nobody at the Fed knew more about repo at the time than Pozsar), serving as point person on market developments for Fed, Treasury and White House officials throughout the crisis (yes, Kashkari was just the figurehead); playing the key role in building the TALF to backstop the ABS market, and advising the former head of the Fed's Markets Desk, Brian Sack, on just how the NY Fed should implement its various market interventions without disrupting and breaking the most important market of all: the multi-trillion repo market.

The Fed's FOMC policy meeting concludes at 2:00 pm ET on Wednesday, with the release of their statement followed by a press conference headed by Fed Chairman, Jay Powell, who will try his best to avoid answering direct questions dealing with the REPO market, for obvious reasons.

Party on!

At the Close, Tuesday, October 10, 2019:
Dow Jones Industrial Average: 27,881.72, -27.88 (-0.10%)
NASDAQ: 8,616.18, -5.64 (-0.07%)
S&P 500: 3,132.52, -3.44 (-0.11%)
NYSE Composite: 13,545.31, -9.77 (-0.07%)

Saturday, January 5, 2019

Weekend Wrap: Friday's Big Gains Offset Thursday's Huge Loss, Dow Up Just 105 In 2019

Wall Street's week straddled 2018 and 2019, as Monday's session was the last of the prior year, and Wednesday, Thursday, and Friday starting off the new year.

Thus, the following final closing prices for the major indices, which will be instructive as we plow through the weeks, months, and quarters ahead:

Dow Industrials 12/31/18: 23,327.46
Dow Transports 12/31/18: 9,170.40
NASDAQ 12/31/18: 6,635.28
S&P 500 12/31/18: 2,506.85
NYSE Composite 12/31/18: 11,374.39

Two big trading days happened back-to-back, in opposite directions. Thursday's (1/3) downdraft was largely attributable to Apple's announcement that revenue for its fiscal first quarter (4th quarter) results would come in well below analyst estimates. December PMI from the ISM was also a contributing factor, insinuating a slowdown in the general economy, much of it tied to US-China trade tensions.

A blowout December jobs report was responsible Friday's about-face. Words from Fed Chairman Jerome Powell added fuel to the ascending fire. Powell stated quite plainly that the Fed was going to be flexible about raising rates and drawing down its balance sheet, which is pulling $50 billion a month out of the bond market.

After all was said and done, the week was just so-so, though the bias was obviously trending positive. There's some inkling of manipulation and coordination of and by the PPT, especially since the Fed was so compliant with its dovish commentary. Nobody really wants a bear market, and the data from Friday's release of the December non-farm payroll report (312K actual vs. 122K projected) suggests that the economy is humming right along and President Trump's promise to create more US jobs is being kept.

The Fed's jawboning was well-timed, coming a day after a confidence-shaking 660-point drop on the Dow, but the remarks by Chairman Powell won't be the last time the Fed has moved the goal posts in search of expediency.

Dow Jones Industrial Average January Scorecard:

Date Close Gain/Loss Cum. G/L
1/2/19 23,346.24 +18.78 +18.78
1/3/19 22,686.22 -660.02 -641.24
1/4/19 23,433.16 +746.94 +105.70

At the Close, Friday, January 4, 2019:
Dow Jones Industrial Average: 23,433.16, +746.94 (+3.29%)
NASDAQ: 6,738.86, +275.35 (+4.26%)
S&P 500: 2,531.94, +84.05 (+3.43%)
NYSE Composite: 11,533.34, +342.90 (+3.06%)

For the Week:
Dow: +370.76 (+1.61%)
NASDAQ: +154.34 (+2.34%)
S&P 500: +46.20 (+1.86%)
NYSE Composite: +242.39 (+2.15%)

Tuesday, December 4, 2018

Stocks Spurt On Tariff Truce; 3-5 Yield Curve Inverts

There was good news on the trade front, but bad news concerning a possible recession.

At the conclusion of the G20 meeting in Buenos Aires, President Trump and his Chinese counterpart, Xi Jinping, announced a 90-day moratorium on tariffs set to take effect on January 1, 2019. Some of the tariffs already in place were set to increase while new tariffs on a variety of goods were to take effect on the new year, but the leaders of the world's two largest economies decided on a cooling-off period and further talks before proceeding.

That good news sent futures soaring in pre-market trading, the euphoria spilling over into the regular session. Barely noticed - and un-noted by the financial press - was a minor inversion in interest rates, with the yield on the 5-year note (2.83%) falling below that of the 3-year treasury note (2.84%).

Though it's not the inversion that most economists are looking for in terms of portending a recession, the minor inversion is a warning shot. The 2-year and 10-year notes are the fear standard, with an inverted curve of those rates consistently preceding every recession since 1955. Currently the 2-year note stands at a yield of 2.83%, while the 10-year holds at 2.98%, notably below 3.00%, after Fed Chairman Jerome Powell softened his stance on rate hikes last week.

Thus, there's a split narrative that threatens to put a lid on gains in the near term. Trade wars have been postponed, for now, but 90 days isn't long enough to establish new guidelines between China and the USA. With the Fed set to raise and check, interest rates are going to give them some maneuverability, though not much, with the federal funds rate settling in somewhere between 2.25 and 2.50%.

Bond vigilantes brought the 10-year note down below the Maginot Line of 3.0% on the first trading day of December. That's more than enough speculation as to where interest rates are headed. In a word, nowhere. The ancillary note is on growth - both domestic and global - which has had a bit of a bump thanks to US strength, but pockets of malaise are popping up everywhere. There seems to be no smooth path heading into 2019, so, after a boost from the Fed and another from the international trading community, this early December rally may not have enough gusto to carry it past the FOMC meeting and through the holidays.

Much emphasis will be put on consumer spending, though with an early Thanksgiving, holiday spending might just peter out a week before Christmas.

It's not all doom and gloom. It's more like murky, with a light at the end of some tunnel.

Dow Jones Industrial Average December Scorecard:

Date Close Gain/Loss Cum. G/L
12/3/18 25,826.43 +287.97 +287.97

At the Close, Monday, December 3, 2018:
Dow Jones Industrial Average: 25,826.43, +287.97 (+1.13%)
NASDAQ: 7,441.51, +110.98 (+1.51%)
S&P 500: 2,790.37, +30.20 (+1.09%)
NYSE Composite: 12,577.54, +120.00 (+0.96%)

Sunday, December 2, 2018

WEEKEND WRAP: Powell Puts Positive Spin On Rates, Economy; Stocks Respond With Banner Gains

As much as stocks were flattened last week, they gained back this week, and then some, rebounding mainly off the lips of Fed Chairman Jerome Powell, who uttered two words which are sure to become ensconced within the annuls of great Fed Chairman one liners, such as Alan Greenspan's notorious "irrational exuberance."

Having a way with words, especially concise two-word constructs, Powell uttered, in a speech at the Economic Club of New York, that interest rates were "just below" neutral, sending stocks spiraling upwards on Wednesday.

Those gains followed two prior sessions with more pedestrian advances, the Wednesday push a 617-point blast on the Dow which sent the industrials into positive territory not only for the month, but for the year as well. The week's gains were capped off by a window-dressing close on Friday, with the Dow posting a nearly 200-point gain, all of which came after 1:30 pm ET.

Events of the week - from Powell's speech to Trump's dealings at the G20 in Buenos Aires - managed to put a positive spin on the outlook for stocks going into the final month of the year and the holiday shopping season.

Effectively, what Powell's statement on interest rates did was virtually assure a 25 basis point hike in the federal funds rate and then a pause at what would have been the next logical rate increase, at the March FOMC meeting, and beyond. Whether the Fed's members actually believes that an overnight rate of 2.25-2.50% neither hinders nor aids the US economy is a question open for debate, as most believed that more rate hikes were necessary per the minutes of the last FOMC meeting earlier in November.

That sentiment put a bit of a damper on the market when released on Thursday, but, as Wall Street memories seem exceedingly short these days, the flattish close didn't have any lasting effect.

Once into 2019, the Fed is likely to continue to spin positively, as Janet Yellen's honorable mention entry in the two-word scrabble that is Fedspeak, "data dependent" should be rolling off the lips of more than a few Fed officials in the cold months of winter.

Undeniably, a dovish Federal Reserve can be nothing but good for stocks, which are the de facto underpinning of the US economy. The Fed - and Powell in particular - may have been taking a sideways glance at the housing market as well, another pillar in the economic construct. Rising mortgage rates have shut down advances in new and existing home sales, punishing home builder stocks like Lennar (LEN), D.R. Horton (DHI), and KB Home (KBH). A stagnant housing market may have been instrumental in the formation of Powell's suddenly-accomodative stance.

Even with the rebound this week, stocks still have a pretty large slope to scale to get back to September or October's all-time highs. The NASDAQ still has issues with falling tech stocks and GM's announcement that it was shuttering five factories and laying off 14,000 workers had a chilling effect on what was an overwhelmingly positive week.

Elsewhere, oil continued to hover at the $50 level for WTI crude, precious metals remained flat to negative, but other global markets perked up a bit.

When the FOMC meets on December 18-19, there will be little doubt about their direction. A rate hike of 0.25% is practically baked into the cake. After that, however, it certainly appears the Fed will consider its work done, for now, at least. The next rate hike - and there is almost certainly to be one or two in the next 12-18 months - will probably come after some gaudy economic data or fresh highs in the stock market.

Until then, the skies are blue and smooth sailing is ahead.

Dow Jones Industrial Average November Scorecard:

Date Close Gain/Loss Cum. G/L
11/1/18 25,380.74 +264.98 +264.98
11/2/18 25,270.83 -109.91 +155.07
11/5/18 25,461.70 +190.87 +345.94
11/6/18 25,635.01 +173.31 +519.25
11/7/18 26,180.30 +545.29 +1064.54
11/8/18 26,191.22 +10.92 +1075.46
11/9/18 25,989.30 -201.92 +873.54
11/12/18 25,387.18 -602.12 +271.42
11/13/18 25,286.49 -100.69 +170.27
11/14/18 25,080.50 -205.99 -35.72
11/15/18 25,289.27 +208.77 +173.05
11/16/18 25,413.22 +123.95 +297.00
11/19/18 25,017.44 -395.78 -98.78
11/20/18 24,465.64 -551.80 -650.58
11/21/18 24,464.69 -0.95 -651.53
11/23/18 24,285.95 -178.74 -830.27
11/26/18 24,640.24 +354.29 -475.98
11/27/18 24,748.73 +108.49 -367.49
11/28/18 25,366.43 +617.70 +250.21
11/29/18 25,342.72 -23.71 +226.50
11/30/18 25,538.46, +199.62 -23.71 +426.12

At the Close, Friday, November 30, 2018:
Dow Jones Industrial Average: 25,538.46, +199.62 (+0.79%)
NASDAQ: 7,330.54, +57.45 (+0.79%)
S&P 500: 2,760.17, +22.41 (+0.82%)
NYSE Composite: 12,457.55, +68.18 (+0.55%)

FOR THE WEEK:
Dow: +1,252.51 (+5.16%)
NASDAQ: +391.55 (+5.64%)
S&P 500: +127.61 (+4.85%)
NYSE Composite: +421.31 (+3.%0%)

Wednesday, November 28, 2018

Fed Chair Powell Currys Favor With Wall Street: Rates "Just Below" Neutral

In what can only be considered an obvious and well-intentioned nod to Wall Street, Federal Reserve Chairman Jerome Powell, speaking at the prestigious Economic Club of New York, noted that the federal funds rate is "just below" the level that economists consider neutral, neither encouraging risk nor dissuading it.

Powell's remarks sparked a rally on Wall Street that was the best in eight months, and probably put to rest any ideas investors may have had of a bear market developing in stocks.

The Fed chairman is no doubt a stock picker and investor himself, so he's well aware of the kind of volatility that has been plaguing stocks in recent weeks. He also may have taken a bit of a queue from President Trump, who has been consistently complaining about the pace of recent Fed rate hikes.

What this means for interest rates is likely that the Fed will go ahead, as expected, and raise the federal funds and prime rates once more in December, and then take a wait-and-see approach going forward. The Fed had been expected to raise rates three more times in 2019, though that approach was largely nixed by Powell's dovish remarks today.

At the most, the Fed might raise rates twice in the coming year, though once or none at all might be closer to the mark. Fueled by easy money policies the past ten years, the stock market, being a key cog in the US economy, would be hard set if low lending rates were curtailed further.

While Wall Street cheered the development, the biggest winners should be consumers, who are addicted to credit and have seen credit card interest rates soar over the past two years as the Fed, like clockwork every quarter, raised rates to which many credit accounts are tied. A cessation of the rate hikes will come as a relief to anybody carrying a credit card balance.

Combined with gains from Monday and Tuesday, today's positive close pushed the Dow back into the green for the month, and the year.

Who said the Fed doesn't pay attention to the stock market?

Dow Jones Industrial Average November Scorecard:

Date Close Gain/Loss Cum. G/L
11/1/18 25,380.74 +264.98 +264.98
11/2/18 25,270.83 -109.91 +155.07
11/5/18 25,461.70 +190.87 +345.94
11/6/18 25,635.01 +173.31 +519.25
11/7/18 26,180.30 +545.29 +1064.54
11/8/18 26,191.22 +10.92 +1075.46
11/9/18 25,989.30 -201.92 +873.54
11/12/18 25,387.18 -602.12 +271.42
11/13/18 25,286.49 -100.69 +170.27
11/14/18 25,080.50 -205.99 -35.72
11/15/18 25,289.27 +208.77 +173.05
11/16/18 25,413.22 +123.95 +297.00
11/19/18 25,017.44 -395.78 -98.78
11/20/18 24,465.64 -551.80 -650.58
11/21/18 24,464.69 -0.95 -651.53
11/23/18 24,285.95 -178.74 -830.27
11/26/18 24,640.24 +354.29 -475.98
11/27/18 24,748.73 +108.49 -367.49
11/28/18 25,366.43 +617.70 +250.21

At the Close, Wednesday, November 28, 2018:
Dow Jones Industrial Average: 25,366.43, +617.70 (+2.50%)
NASDAQ: 7,291.59, +208.89 (+2.95%)
S&P 500: 2,743.79, +61.62 (+2.30%)
NYSE Composite: 12,417.63, +229.56 (+1.88%)

Tuesday, July 17, 2018

Fed Chairman Powell Mastering Greenspan-speak; Some Investors Pleased, Others Confused

Fed Chairman Jerome Powell was grilled today by members of the Senate Banking Committee, and was asked by senator Pat Toomey of Pennsylvania about the flattening (or tightening) of the yield curve.

Toomey expressed his question to the Chairman, thusly:
“Some people are concerned that a flattening curve or inverted curve correlates with economic recession. Here’s my question: does a dramatic change in the shape of the yield curve in any way influence the trajectory you guys [the Fed] are on with respect to normalizing interest rates and the balance sheet?”

Quoting Chairman Powell's answer from the story:

“I think what really matters [about the yield curve] is what the neutral rate of interest is,” Powell said.

“And I think people look at the shape of the curve because they think that there’s a message in longer-run rates — which reflect many things — but that longer-run rates also tell us something, along with other things, about what the longer-run neutral rate is. That’s really, I think, why the slope of the yield curve matters. So I look directly at that.”

Literally, Powell did not answer the question, taking a page from the master of obscurity, mumbling, and ambiguity, former Fed Chairman, Alan Greenspan, who was notorious for answering questions and outlining positions in such an arcane and circuitous manner that it took the likes of William Safire to figure out just what he was saying, and even then, nobody was absolutely certain their analysis was correct.

Powell's rhetoric appeared to be pleasing to stock jockeys on Wall Street, who bid up prices a bit on the day, closing at its best level since June 14 (25,175.31). Perhaps Powell is embarking on a back-to-the-future nomenclature for the Federal Reserve, wherein the general public is to stand in awe of the special powers of the central bank and not question its motives.

That's how it was before and during Greenspan's reign as Chairman and maybe it might not be such a bad thing for the Fed to be less engaging and transparent today.

After all, nobody really understands what the Fed is talking about, including the Fed governors and presidents of the regional Fed banks, so why bother to try to explain it all to ordinary plebes, whose only wishes are to be left alone and offered a reasonable return on their investments?

Dow Jones Industrial Average July Scorecard:

Date Close Gain/Loss Cum. G/L
7/2/18 24,307.18 +35.77 +35.77
7/3/18 24,174.82 -132.36 -96.59
7/5/18 24,345.44 +181.92 +85.33
7/6/18 24,456.48 +99.74 +185.07
7/9/18 24,776.59 +320.11 +505.18
7/10/18 24,919.66 +143.07 +648.25
7/11/18 24,700.45 -219.21 +429.04
7/12/18 24,924.89 +224.44 +653.48
7/13/18 25,019.41 +94.52 +748.00
7/16/18 25,064.36 +44.95 +792.95
7/17/18 25,119.89 +55.53 +848.48

At the Close, Tuesday, July 17, 2018:
Dow Jones Industrial Average: 25,119.89, +55.53 (+0.22%)
NASDAQ: 7,855.12, +49.40 (+0.63%)
S&P 500: 2,809.55, +11.12 (+0.40%)
NYSE Composite: 12,779.22, +30.44 (+0.24%)

Wednesday, June 13, 2018

Stocks Slide After FOMC Raises Federal Funds Rate

As was widely expected, the Federal Open Market Committee (FOMC) of the Federal Reserve issued a policy directive to increase the federal funds rate to 1.75-2.00%, marking the seventh rate hike in the current cycle, bringing interest rates further toward normalcy while inching the economy closer to recession.

As every recession one the past 40 years has at least partially been aided by Fed rate increases, this time is no different, as the FOMC issued the second 25 basis point increase of the year, with prospects of another 50 basis point increase through the end of the year.

Conjecture has been steady that the Fed would hike rates either three or four times in 2018. Today's hawkish tone indicated that four equal 25 basis point increases is the most likely outcome, with 25 basis point hikes in September and December.

Stocks were wary going into the June meeting, which concluded today at 2:00 pm EDT and was followed by a press briefing from Fed Chairman Jay Powell, who did little to allay fears that the Fed would continue its reckless path in the face of what can best be called tepid economic data.

After the first rate hike in February, stocks nosedived, and they did a prelude to an encore performance after the announcement, though the losses were contained and ganged into the final few minutes of trading, the Dow suffering the biggest percentage decline and a nearly 120-point selloff.

The bond market took the news in stride, with the 10-year note barely budging, continuing to nose around the 3.00% yield level. Silver was the unanimous winner of the day, as gold's little sister initially fell, but then shot up 25 cents, ending the day one $17.00 the ounce for the first time since mid-April.

What lies ahead for markets the remainder of the week is an assessment of inflation (both CPI and PPI were up sharply in the most recent disclosures) and the overall economy. With trade wars looming larger than ever and productivity stalled, there exists a very good chance that a recession could be in the cards within the next six to 12 months, while scores of analysts weigh in on the dubious nature of the government's official gauges of inflation, unemployment and GDP.

Thursday's trade promises to be choppy, as sentiment is leaning toward being equally split between a bullish and bearish stance on stocks. Valuations maintain their loftiness, but money has to flow somewhere, and there are still plenty of fund managers looking for further gains this year.

Dow Jones Industrial Average June Scorecard:

Date Close Gain/Loss Cum. G/L
6/1/18 24,635.21 +219.37 +219.37
6/4/18 24,813.69 +178.48 +397.85
6/5/18 24,799.98 -13.71 +384.14
6/6/18 25,146.39 +346.41 +730.55
6/7/18 25,241.41 +95.02 +825.57
6/8/18 25,316.53 +75.12 +900.69
6/11/18 25,322.31 +5.78 +906.47
6/12/18 25,320.73 -1.58 +904.89
6/13/18 25,201.20 -119.53 +785.36

At the Close, Wednesday, June 13, 2018:
Dow Jones Industrial Average: 25,201.20, -119.53 (-0.47%)
NASDAQ: 7,695.70, -8.09 (-0.11%)
S&P 500: 2,775.63, -11.22 (-0.40%)
NYSE Composite: 12,785.75, -58.96 (-0.46%)

Thursday, March 22, 2018

Fed Has Ventured Into Dangerous Territory With Most Recent Rate Hike

Whether Wednesday's 25 basis point hike in the federal funds rate will eventually become a seminal moment in economic history, only time will tell. On the surface, there are a good number of indications that the Fed, by increasing the overnight lending rate to 1.50-1.75%, may have finally blundered into a crucial policy error.

The hike being the sixth such rate increase of 0.25% in the past 27 months, the Federal Reserve has ventured into an area which has the potential to do more harm than good, as evidenced by the sudden turnabout in stocks after the rate decision was announced, and, more to the point, during Fed Chairman Jerome Powell's first press conference.

Stocks initially rose on the release, but gave back all of the gains, finally ending with complete capitulation as the trading day drew to a close, turning what was a brief 250-point gain into a lasting 45-point loss at the close.

What has equity investors puzzled and anguished is the Fed's insistence on their continued insistence on higher interest rates, despite economic data that shows quite clearly that inflation is nascent and growth largely a chimera, a construct of rose-colored projections of the general economy added to massive increases in government spending, which is, in the end, fully lacking in productive qualities.

Governors of the Federal Reserve, ensconced, as they are, within their cocoons of smug condescension, are either uninformed to the realities of life in the real world or purposely interpreting their trumped-up economic data as reflective of a booming economy.

The other possibility is that the Fed officials know that the economy - both domestic and global - is headed for recession, and they are preparing for the worst, employing the only tool they believe effective, the varying of interest rates with the intent to either slow lending and economic activity by raising them, or increase the same by lowering them.

Sadly, the Fed has the cart well out in front of the horse. Their rate increases will slow the economy, precisely at a time in which they should be doing nothing. Eventually, the Fed will have to reverse the direction of their myopic monetary monopoly, as the economy - which has been limping along at two percent growth or less for the past ten years - and lower rates, ushering in another era of mad money machinations, sending valuations of stocks out into the cosmos, while the public watches the explosion of wealth inequality soar to unimagined heights.

Besides the folly of raising rates in a weak economic environment, the Fed continues to preach that they are decreasing their massive balance sheet, rolling off their horde of somewhat dubious mortgage-backed securities and treasury bills, notes and bonds.

Having taken a path toward a rather rapid depletion of liquidity, Mr. Powell and his cohorts will soon find that themselves vilified and, with any hope, bankrupt.

Their continuing charade of being the "best and brightest" know-it-alls in the financial universe must come to an end soon, lest the entire global economic structure be collapsed into one giant heap of unplayable debt, impoverishing the world's billions of citizens while laying bare their own conceit, deceit, and utter depravity.

Dow Jones Industrial Average March Scorecard:

Date Close Gain/Loss Cum. G/L
3/1/18 24,608.98 -420.22 -420.22
3/2/18 24,538.06 -70.92 -491.14
3/5/18 24,874.76 +336.70 -154.44
3/6/18 24,884.12 +9.36 -145.08
3/7/18 24,801.36 -82.76 -227.84
3/8/18 24,895.21 +93.85 -133.99
3/9/18 25,335.74 +440.53 +306.54
3/12/18 25,178.61 -157.13 +149.41
3/13/18 25,007.03, -171.58 -22.17
3/14/18 24,758.12 -248.91 -271.08
3/15/18 24,873.66 +115.54 -155.54
3/16/18 24,946.51 +72.85 -82.69
3/19/18 24,610.91 -335.60 -418.29
3/20/18 24,727.27 +116.36 -301.93
3/21/18 24,682.31 -44.96 -346.89

At the Close, Wednesday, March 21, 2018:
Dow Jones Industrial Average: 24,682.31, -44.96 (-0.18%)
NASDAQ: 7,345.29, -19.02 (-0.26%)
S&P 500: 2,711.93, -5.01 (-0.18%)
NYSE Composite: 12,683.76, +20.12 (+0.16%)

Wednesday, March 21, 2018

Down, Down, Down, Up, Up, Down, Up

As the headline indicates, stocks are in an extreme state of fluctuation. The ups-and-downs in the headline indicate the direction of the Dow Jones Industrial Average for the past seven sessions.

The total point movement for those seven days is 1217.97 with the emphasis on the downside of over 600 points. The average change was 174.00, with only one day (March 16) posting a change of less than 115 points (+72.85). It is plain to see that volatility is quite high. Wednesday's rate policy decision from the FOMC should provide some idea of direction, though it is unlikely to calm markets at all.

The decision - probably a hike in the federal funds rate of 0.25% - is scheduled for Wednesday, 2:00 pm EDT with new Fed chairman Jerome Powell's first press conference at 2:30 pm EDT.

Dow Jones Industrial Average March Scorecard:

Date Close Gain/Loss Cum. G/L
3/1/18 24,608.98 -420.22 -420.22
3/2/18 24,538.06 -70.92 -491.14
3/5/18 24,874.76 +336.70 -154.44
3/6/18 24,884.12 +9.36 -145.08
3/7/18 24,801.36 -82.76 -227.84
3/8/18 24,895.21 +93.85 -133.99
3/9/18 25,335.74 +440.53 +306.54
3/12/18 25,178.61 -157.13 +149.41
3/13/18 25,007.03, -171.58 -22.17
3/14/18 24,758.12 -248.91 -271.08
3/15/18 24,873.66 +115.54 -155.54
3/16/18 24,946.51 +72.85 -82.69
3/19/18 24,610.91 -335.60 -418.29
3/20/18 24,727.27 +116.36 -301.93

At the Close, Tuesday, March 20, 2018:
Dow Jones Industrial Average: 24,727.27, +116.36 (+0.47%)
NASDAQ: 7,364.30, +20.06 (+0.27%)
S&P 500: 2,716.94, +4.02 (+0.15%)
NYSE Composite: 12,663.64, +12.18 (+0.10%)

Friday, March 2, 2018

Stocks Continue Falling As March Commences With 420-Point Drop

After a brutal February, which took the Dow down by more than 1100 points, the first day of March suggested that more capital carnage may still be yet to come.

After a shaky positive start to the session, stocks quickly reversed course at midday after remarks by NY Fed head, William Dudley, and Fed Chair Jerome Powell signaled that the Fed would be pursuing three, and possibly, four, rate hikes in 2018. Accelerating the decline was the announcement by President Trump that he planned to impose 25% tariffs on imported steel and a 10% tag on imported aluminum.

Added to the losses of the last two sessions of February, Thursday's 420-point decline has ripped 1100 points off the Dow and futures are pointing to a lower open on Wall Street after stocks in Asia (NIKKEI, -542.83; Hang Seng, -460.80) were hit hard and European bourses have opened hard to the downside with Germany's DAX the biggest loser, down more than two percent at midday.

The Dow continues to cruise closer to correction territory, though it is still another 1000 points away, at 23,594, but, as seen in previous sessions, that amount of loss can occur in one or two sessions with relatively little resistance.

Current conditions suggest that economies globally are contracting, after a binge of easy credit field by central bank intervention and wanton money-printing for the past nine years. If the Fed and other central banks are convinced those policies must come to an end, an all-encompassing crash in the not-so-distant future is not out of the question.

Dow Jones Industrial Average March Scorecard:

Date Close Gain/Loss Cum. G/L
3/1/18 24,608.98 -420.22 -420.22

At the Close, Thursday, March 1, 2018:
Dow Jones Industrial Average: 24,608.98, -420.22 (-1.68%)
NASDAQ: 7,180.56, -92.45 (-1.27%)
S&P 500: 2,677.67: -36.16 (-1.33%)
NYSE Composite: 12,518.73, -133.82 (-1.06%)

Tuesday, February 27, 2018

Markets Get Spooked By Bullish Fed Chairman Jerome Powell

Stocks posted their biggest daily percentage losses since February 8 after comments by newly-appointed Fed Chairman Jerome Powell before the U.S. House of Representatives’ Financial Services Committee sent the major indices into a tailspin.

In his first congressional visit since replacing Janet Yellen, Powell's upbeat commentary on the health of the economy was taken by some to indicate that he may be in favor of four rate hikes this year, instead of the three already anticipated by the Street.

The key phrase from the new Chairman was, "my personal outlook for the economy has strengthened since December," which analysts thought to be a little too optimistic, which in turn could prompt the Fed to raise interest rates at a faster pace than previously thought.

With algos and ETFs fine-tuned to turn on every headline, Tuesday's downside move is largely the result of a market two-closely intertwined and concerned over daily news rather than as a discounting mechanism for future earnings. The current contract of markets - and its computer-driven near-instantaneous reactions - can cause sudden directional movement, just as it kept the lid on volatility over the previous nine years of seeming tranquility in a low-interest rate environment.

Nowadays, everything moves at once, like a stampeding herd, rather than taking a slower, cautionary, individual stock approach. Today's action also reinforced the notion that good news was bad, as the narrative that an improving economy may set the stage for quicker interest rate rises. The 10-year-note ended the day yielding 2.91%, not an alarming number, but one which is near the recent high end of the benchmark gauge.

Powell speaks before the Senate Banking Committee on Thursday, completing his mandated annual addresses to congress. After today's fandango, it's very likely that the Fed Chairman could backtrack a little, calming fears and sending stocks higher on the final day of trading for the month. It should be worth noting how Chairman Powell reacts and whether he plays to the market or remains true to his predetermined outlook.

Stocks would have to stage a monumental rally to finish February on the plus side. The Dow is down nearly 740 points since January 31.

Dow Jones Industrial Average February Scorecard:

Date Close Gain/Loss Cum. G/L
2/1/18 26,186.71 +37.32 +37.32
2/2/18 25,520.96 -665.75 -628.43
2/5/18 24,345.75 -1,175.21 -1,803.64
2/6/18 24,912.77 +567.02 -1,236.62
2/7/18 24,893.35 -19.42 -1,256.04
2/8/18 23,860.46 -1,032.89 -2288.93
2/9/18 24,190.90 +330.44 -1958.49
2/12/18 24,601.27 +410.37 -1548.12
2/13/18 24,640.45 +39.18 -1508.94
2/14/18 24,893.49 +253.04 -1255.90
2/15/18 25,200.37 +306.88 -949.02
2/16/18 25,219.38 +19.01 -930.01
2/20/18 24,964.75 -254.63 -1184.64
2/21/18 24,797.78 -166.97 -1351.61
2/22/18 24,962.48 +164.70 -1186.91
2/23/18 25,309.99 +347.51 -839.40
2/26/18 25,709.27 +399.28 -440.12
2/27/18 25,410.03 -299.24 -739.36

At the Close, Tuesday, February 27, 2018:
Dow Jones Industrial Average: 25,410.03, -299.24 (-1.16%)
NASDAQ: 7,330.35, -91.11 (-1.23%)
S&P 500: 2,744.28, -35.32 (-1.27%)
NYSE Composite: 12,819.22, -180.40 (-1.39%)

Friday, November 3, 2017

Trump Nominates Jerome Powell As Fed Chair; Goldman Sachs Execs Happy

Some equities responded with favor to President Trump's nomination of ultimate insider, Jerome Powell, to the chairmanship of the Federal Reserve.

Without so much as the batting of a single eyelash, Goldman Sachs (GS), Microsoft (MSFT), McDonald's (MCD), Boeing (BA), and JP Morgan Chase (JPM) led the Dow to yet another record high, mainly upon the notion that Powell would continue to easy money and lax regulatory environment so loved by Wall Street.

It would be easy to point the finger at Mr. Trump for appeasing the status quo, though it might not be an accurate assessment of the situation. The president is smart enough to know that keeping Wall Street happy and profitable has a profound effect on his standing within the business community and promoting a life-long lawyer (not an economist) and financier with multiple ties to various private and public money machines goes a long way toward keeping the Fed on its current track (Powell has not cast a dissenting FOMC vote in his five years as a voting member.

There could be worse environments than the current regime controlling the global economy, though it is difficult to think of one that could compare with the outright rigging and asset-prompting the central banks have engaged in over the past ten years. In case one was not in complete agreement and chose not to engage in one of the longest and best-maintained bull markets in history, the past is prologue and the nomination of Powell ensures a smooth transition to the Fed's top post. More of the same would seem to be the open dialogue of the day.

Keeping the rich rich and the middle and lower classes entertained, while not the optimal policy directive, has served to keep the system afloat, despite its various warts, bruises and open wounds.

Much of finance is done behind closed doors and it's probably a good thing, because were the wicked deals to be generally known by the public, riotous behavior might ensue. Keeping the Fed on an even keel will likely result in ever higher prices for stocks and a more complacent (if that is even possible with the VIX hovering around 10) investment community.

What could go wrong?

At the Close, Thursday, November 2, 2017:
Dow: 23,516.26: +81.25 (+0.35%)
NASDAQ: 6,714.9429, -1.59 (-0.02%)
S&P 500: 2,579.85, +0.49 (+0.02%)
NYSE Composite: 12,372.96, +10.08 (+0.08%)